Okay I teach a segment of a first time homebuyers course in regards to the mortgage process. One of the things we cover is the documentation which is required to obtain a mortgage. But do we really know up front everything that is needed? Actually
No, it's a mystery
But as a loan officer, here's my first request. Documentation that I must have no later than at the time of application;
2010 & 2011 tax returns (all schedules)
2010 & 2011 W2's
most recent 30 days of paystubs
most recent 2 months of bank/asset statements (all pages)
copy of drivers license
copy of social secrity cards
Is that it?
based on an interview, either before the application, or at the time of the application, the borrowers in all likelihood will be asked to provide additional documentation which is unique to their particular situation, whatever that may be.
Next; the loan goes to the processor
will the processor ask for additional information? in all likelihood, yes.
data is then collected and evaluated, and
the loan goes to the underwriter
will the underwriter ask for additional information? in all likelihood, yes.
Next you receive a clear to close, in some companies, and in others not.
will the closer/closing department need additional information. it's certainly possible.
Enough, you say. the lenders response; maybe.
So, what's up with all the paperwork?
Just a few years past lenders had programs where there were little or no requirements for paperwork. They were very trusting. I'd go as far as to say, if a buyer had a pulse, and wanted a house they could have one. And I'm not sure the pulse was necessary.
Lenders made these loans, and to a great degree buyers didn't pay back the money. The lenders then lost a great deal of money. If you've lived through this you know that an explanation of that situation could go on forever.
So, the investors want the buyers to prove they have acceptable income, source of downpayment, and credit history.
Now, along with that the federal government, particuarly two guys named Dodd & Frank rallied the troops, got a little crazy, and passed some interesting laws, as well as creating a brand spanking new, consumer protection agency.
In response to these laws the lenders are required to prove that the buyers have acceptable income, source of downpayment, and credit history.
For those lenders and Realtors who have been around for awhile you may think that, as I do, that the guidelines today are kind of traditional. They bare a striking resemblence to what the guidelines looked like before the "pulse loans." These guidelines were in place back when the borrowers had better track records of repayment, that being paying the money back.
Finally, and I hope my mind goes blank after this;
usually as the buyers presents the documentation requested two things happen.
One, it is incomplete.
Two, it raises questions.
the paystub doesn't support the income the borrower stated.
they were laid off, they get overtime, they get bonus', they get paid (you know) cash, whatever
the bank statements are incomplete, they don't show sufficient funds to close, there are large deposits, they're missing pages, whatever
In these cases and others too numerous to mention additional/supporting documentation is requested and let me tell you a little secret here.
It is in the buyers best interest to provide the documentation as soon as it is requested, in a timely manner so to speak.
Now, in conclusion. The current guidelines in regards to documentation are not likely to change real soon. The loan officers need to be upfront with their clients and help establish their expectations. Here's my take on it.
We are currently in a documentation intensive lending environment (it is what it is). We know this to be the case. The underwriters rule, and the documentation requested needs to be provided, in a timely fashion. There will not be many exceptions granted, if any.
So, in a nutshell;
that's what's up with mortgage documentation.